Chartwell is excited to welcome Michael Coppa to the firm as a Managing Director, focusing on business development and transaction execution activities in the Southeast region of the U.S.

Article

Valuation Issues in ESOP Companies

By Chris Staloch
TopicValuation

Valuation Issues in ESOP Companies

ESOP companies contemplating the implementation of an equity compensation or executive compensation plan must look carefully at its impact on stock value. A thorough analysis of valuation consequences as part of the plan design is critical. In addition, the ESOP’s trustees should understand the underlying reasons for the plan’s implementation and the expected behaviors the plan is intended to drive. Plans should generally be designed to drive growth and/or profitability goals. In addition, they can be used to both recruit and retain key employees. A well-designed plan will provide meaningful rewards to the plan participants, but not to the detriment of the ESOP participants.

Impact of Equity Compensation and Executive Compensation on Stock Value

The impact on the stock value of a company will vary depending on the type and design of the plan. From a valuation standpoint, one can think of these programs in terms of substance (cash, stock, or synthetic equity) and time (short-term [annual], mid-term [1 to 5 years], or long-term [greater than 5 years]). However, regardless of the nature of the plan, each has the potential to be dilutive to the ESOP if not properly structured…

Chris Staloch

Chris Staloch

“We have been fortunate to work with many amazing companies over the years, with each interaction providing us a unique opportunity to share our ideas and learn from the incredible insights of different management teams. Our collaborative approach allows us to utilize learnings across projects, benefiting both our clients and business partners.”

Meet Chris


Back to top